The purpose of this
review is to focus on models of market mechanisms that contain a sales response
function and competitive reaction functions. Understanding such models can lead
to improvements in the Marketing productivity of individual firms, as demonstrated
by Parsons and Bass (1971), Hanssens et al. (2001). This paper discusses major
theoretical developments in modeling competitive Marketing behavior with
respect to several variables.
We begin by discussing the work of Lambin, Naert and
Bultez (1975) (LNB), who have generalized the Dorfman-Steiner theorem to the
case of an oligopoly with multiple competitive reactions and expansible
industry demand. Next, we analyze the extended LBN model by Hanssens (1980)
which incorporates the phenomena of the level of one marketing instrument
affecting, or being affected by, levels of other marketing instruments within
the same firm into a generalized reaction matrix. Finally, the important issues
of modeling asymmetric brand competition, not introduced in the precedent
frameworks, as well as the prediction of competitive marketing behavior will be
introduced.
